Austerity in Europe and the US Teach Us a Lesson About Republican Plans to Cut and End Social Security

October 26, 2010

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Do you know what’s been going on in France lately?

There has been a public outcry over pending pension legislation. There are protests in the streets because the government seeks to raise the retirement age to 62. The bill passed the French Senate last week and heads to the National Assembly. The National Assembly previously passed a similar bill, so the current version is likely to pass.

There is a lot of support for a general strike in France when the bill becomes law, about 70% support strikes and protests.

The pension problems in France and other European nations, and our own issues with Social Security and republican plans to either privatize it and/or raise the eligibility age and lower benefits, bring us to the discussion of austerity. Austerity is the current name for the general idea that governments should cut public programs to make up for the debt and budget crises. It’s the opposite of the Keynesian notion of stimulus that brought us out of the Great republican Depression of the 1930s. Those who argue that it was the war, and not the stimulus, that ended the Depression forget that war is a huge stimulus program in and of itself and similar, and that better stimulus can be accomplished without actually killing anybody or bombing anyone’s home.

Economists in the UK say that austerity is only going to hit the poor, those least to blame for the current problems. Italian economists fear that EU austerity programs will send Italy, and surrounding countries, into an economic tailspin. The point out that overspending didn’t cause the problems. The Italians blame measures put in place to hold down salaries and unfair trade practices.

Last month, 300 U.S. economists, including Dean Baker of the Center for Economic and Policy Research, Robert B. Reich currently of the University of California Berkeley and former Secretary of Labor, and Joseph Persky of the University of Illinois at Chicago, created a coalition called Don’t Kill Growth and Jobs in the Name of Deficit Reduction. You can read their statement at the previous link.

Nobel prize winning economist, Paul Krugman, calls austerity a myth of what he describes as “the invisible bond vigilante and the confidence fairy.” Krugman’s “bond vigilantes” are the investors who want to get paid, and will pull the plug as soon as they feel insecure about being paid. Krugman points out that the plug quite gets pulled. Krugman’s “confidence fairy” is the trickle down that’s supposed to cushion the spending cut blow. The problem is that nothing ever seems to trickle down, at least nothing good.

So, why are republicans selling austerity and why are some Americans buying it?

I think austerity arguments are used and work because austerity seems intuitive to the layman. While untrue, comparing apples and oranges economically, individuals feeling the pain of having to cut their own spending, are easily convinced that government has to do the same thing. People also like the idea that they won’t have to suffer alone. If they have to cut their budget, at least someone on Social Security, Medicare or Medicaid will be joining them.

I also think that republicans want to pave the way for greater cuts that will result in the end of social programs altogether. A privatized or partially privatized Social Security system will be far more costly to manage than the current system because of all the separate accounts and investments and all the calculations of the share to be separately invested, not to mention the notices to participants that will be required. With just the normal volatility of investment markets, private Social Security accounts are likely lose ground. People not used to sharing the investment risk of the Social Security Trust fund, and taxpayers frustrated by the new bureaucracy managing the whole thing, will eventually clamor for it’s demise. They will clamor sooner if the benefits are cut small enough to not seem worth the effort.

As austerity programs in Europe cause big trouble for both young and old, the American media is working on overdrive to make the French protesters look bad. Much of the mainstream media in this country is focusing on the effects of the French protests on gas supplies and industry. Oh horror, a Lady Gaga Paris concert was cancelled. I heard a program on the topic on NPR last night. The host and guests were talking about the participation of college students, and even young high school students, in the Paris protests. The students claimed that today’s student is tomorrow’s retiree and articulated fears that leaving older workers in the workplace hurt their chances to get jobs on graduation. Rather than addressing these legitimate concerns, the panel immediately moved to a discussion of the strict and boring French school system. It was suggested that if the schools had more sports teams, orchestras and jazz bands, there would be fewer students protesting.

No wonder republicans also want to cut education. Less education, more sports and entertainment will fill the days of those likely to wonder way we gave away their social security and doomed them to a slow economy.

Congress is set to repeal the Affordable Care Act, which means that the drug companies will lose millions of customers. Because drug companies will want to make up for their lost revenue, drug prices are likely to rise.

To expose Donald Trump's bait-and-switch on the economy, it will be vital to follow the money, and expose the corruptions and the lies. Challenging Trump’s appointments will provide the first opportunity to pierce the veil.